Published 2:47 am, Wednesday, November 30, 2011

Net income fell to 804 million euros ($1.12 billion), from 1.14 billion euros in the year-earlier period, the Bilbao, Spain-based bank said in a filing to regulators today. That missed the average 865.3 million-euro profit forecast in a Bloomberg survey of 10 analysts.

Earnings fell by half in Spain, where banks are lumbered with assets damaged by the crash in the real-estate market. Spanish lending shrank and the bad-loans ratio in its home market rose. BBVA reported a trading loss amid "convulsed" markets and a decline in asset values.

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"It's really hard going for them at the moment," said Neil Smith, an analyst at WestLB AG in Dusseldorf, who rates BBVA "sell." "Earnings are disappointing, well below consensus with a negative trading item which needs some more explaining."

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Bad loans as a proportion of BBVA's total lending rose to 4.1 percent from 4 percent in June, the bank said.

Loans newly classed as in default fell to 2.9 billion euros from 3.7 billion euros in the second quarter when the lender "subjectively" classified 450 million euros of Spanish mortgages as non-performing. Costs for covering damaged assets fell to 904 million euros from 1.19 billion euros a year ago.

"Everybody is adopting a more cautious tone on asset quality and it's reasonable to expect BBVA to frame their comments in that context," Daragh Quinn, a Madrid-based analyst at Nomura International who rates the bank "reduce," said before the earnings were published.

Profit from Spain, which accounts for 60 percent of the bank's lending, fell 49 percent to 265 million euros, BBVA said. Lending in the country fell an annual 2.2 percent as the bank's bad-loans ratio there climbed to 4.9 percent from 4.7 percent in June.

Earnings from Mexico fell to 402 million euros from 445 million euros, BBVA said.